Regional trade

Non-tariff barriers set back exports to India

Trucks are seen at Akhaura Land Port. Barriers to access to Indian markets increase costs of both exporters and importers. Photo: Rashed Shumon

Local entrepreneurs are unable to reap the full benefits of duty-free exports to India because of the prevalence of non-tariff barriers, said exporters.
Some of these problems include exporters facing hassles in obtaining visas, product testing requirements and delays in getting test results from Central Food Laboratory (CFL) of India, duty variations from port to port, and the need to store imported goods at Bonded Warehouses by showing bank solvency certificates of Rs 50 lakh.
Despite certification by Bangladesh Standard Testing Institution (BSTI), cement exporters require further testing by the Bureau of Indian Standards (BIS) for entry into the Indian markets, mainly North-East India.
Meanwhile, the export of soap through Agartala Land Port is suspended for more than a year after the neighbour imposed a bar on entry from the particular point based on a decades-old rule.
At the same, inadequate physical facilities such as parking, the 10am-4:30pm office hours of Indian customs, narrow road connection to Bangladesh land ports at Indian border also hampers exports.
"It affects our exports to India," said Kamruzzaman Kamal, director of marketing of the leading food processor and exporter Pran-RFL Group. The group exports products worth $10 million to India a year.
Exporters said the existing barriers to entry in Indian markets delay shipments and increase costs of both exporters and importers due to compliance requirements.
These problems in exports to India exist at a time when trade gap between the two close neighbours is on the rise, mainly due to the rise in imports from India every year.
The trade deficit more than doubled in just five years to $4,057 million in 2010-11 from $1,998.58 million in fiscal 2006-07, with Indian products dominating the two-way trade basket, according to Bangladesh Bank and Export Promotion Bureau data.
Bangladesh mainly exports raw jute and jute goods, hilsha fish, processed foods, garments and knitwear, leather, cement, soap and cosmetics to India while imports include textile raw materials and chemicals, food items, vehicles and associated transport equipment, machinery and machinery appliances.
In the recent years, Bangladesh exports to India have increased but exporters said the volume of exports would go up further if Indian authorities do not impose rules that discourage imports from here.
Last month, the Indian authorities imposed a 4 percent special countervailing duty (CVD) on jute yarn.
"The extra imposition of 4 percent duty has left the import of jute yarn into India totally unviable and we are left with no option but to gradually stop imports," said a letter sent by Jute Products Importers Association of India to Bangladesh High Commission in New Delhi.
The letter, singed by the association's Vice Chairman Rishi Jalan, said the imposed tax has made Bangladesh jute yarn costlier than Indian ones.
Kamal of Pran-RFL Group said the company, which is set to establish a manufacturing plant in North East India, is recording a rise in exports to India. To develop the market, employees need to visit different Indian states frequently.
But as the Indian High Commission in Dhaka usually issues one-month single entry visas, most Pran officials have to come back to Dhaka every month and apply for a new visa, he said.
"Again, it takes 10-15 days to get a new visa," said Kamal, seeking one-year and 6-month multiple entry visas to allow its designated people to visit India and reduce the hassles with applying for visas frequently.
Problems with testing
The Pran official also pointed at the delays in getting testing reports for food items from CFL in India and the costs associated with testing each item in each consignment, which is mandatory.
He said samples are sent to Guwahati Health Analyst Office by post from the customs office, not by hand. It takes 12-13 days for the sample to reach. Similarly, test reports are also sent by post, causing further delays.
Earlier, the reports were faxed, according to the Pran official.
Rules and duty variations from
port to port
The Pran official said they also face hassles for the different duties charged at different ports in India.
For example, the duty on the PRAN Magic Cup Jelly (12 gm) and PRAN Candy (2.5 gm) is 5 percent at Agartala Port of Tripura, whereas it is 10.30 percent in the Suterkandi Port of Assam, according to Kamal.
He said the duty should be the same for a particular product in all the land ports.
Khurshid Ahmad Farhad, head of exports of Square Toiletries Ltd, said the company could not ship its Meril beauty soap brand through the Agartala Land Port in Tripura for over a year after the port authorities termed the item a cosmetic and restricted shipments based on the decades-old Drugs and Cosmetics Rules 1945.
But soap exports from other land ports such as Old Raghna of Tripura and Karimganj are on, he added.
In case of Benapole-Petrapole, testing of each consignment of soap and other cosmetics have been made mandatory, although the Indian government had earlier informed Bangladesh that there was no need for compulsory testing of soap imports, he said.
At Agartala port, the customs office does not receive shipments of food items from Bangladesh if the Customs Super remains absent for any reason or goes on leave, he added.
“In addition, if all the trucks of a particular shipment can not be sent in a serial, the customs authority does not receive the shipment and returns the trucks," said Kamal.
Bonded warehouse
In May 2010, the Office of the Commissioner of Customs (preventive) of North East Region imposed a rule where all importers have to keep imported products in a designated bonded customs warehouse until receipt of test reports.
The new rule requires importers to show a Bank Solvency Certificate of Rs 50 lakh to take a bonded warehouse.
"This is a huge amount for an importer. He needs to mortgage a big portion of his property to get the certificate. Thus, many importers are discouraged to do business," said Kamal.
Government initiative
Dr Mostafa Abid Khan, joint chief of Bangladesh Tariff Commission, said the problems that local exporters face would be brought up in negotiations in the next Joint Working Group meet of the two countries.
“Some of the problems that exporters faced earlier have been solved," he said, citing withdrawal of special additional duty on garment exports by India and framing a standard operating procedure for movement of trucks into ports of both the countries.
Dr Humayun Kabir, director (standards) of Bangladesh Standard and Testing Institution (BSTI), said the agency received international recognition of standard for 10 processed food items, biscuits, cement and some home textile products mid this year.
"After accreditation, we believe these products should get entry to the Indian market without any barriers and will not require further testing in India," he said.
Kabir said some products require mandatory testing in India as per the law of the country.
The BSTI director said it will be helpful for BSTI to move forward if exporters let BSTI know about their specific problems.